As more olim opt for remote work as a way to make a living in Israel, Employer of Record services have become more popular. EOR services are Israeli employers who hire people to provide services for other companies.
Here’s an example of how it works:
David, a graphic designer working for a marketing agency in New York wants to make aliyah. His agency doesn’t want to lose his talent, so his bosses agree that he can work remotely from his new home in Jerusalem. David knows that an American company can’t pay a W-2 salary in Israel without incurring tax liability. He could open a freelance business in Israel, but this requires him to deal with paperwork and hire an accountant to assist with reporting to the Israeli government. Worse, it means that he has to pay 15% of his income to US Social Security. David is concerned that after paying Social Security, Bituach Leumi, income tax, health tax and pension, he won’t have enough to live off.
Enter an EOR service. David is now employed by an Israeli company. He receives an Israeli pay stub and all payments are automatically withdrawn before he receives his salary. He is not self-employed, so he doesn’t have to pay Social Security. David’s marketing agency becomes a client of the EOR. Every month they pay the EOR and that company pays David his salary.
Now that David has decided to work through an EOR, he needs to choose a service. Since this is all new for him, he needs some guidance on how to choose a service that will be seamless and financially smart. These are the questions we recommend that he ask:
- How responsive is the staff? Customer service is important when choosing any service, but when it comes to the service that’s managing your salary, it’s especially crucial. The EOR should be accessible by email and phone and there should be someone to talk to when you have a question or a problem.
- How knowledgeable are they? An EOR should have extensive knowledge of HR and payroll, legal requirements and financial issues. They should also be willing to explain how everything works and have people on staff or who they recommend to help with setting up pension plans or Keren Hishtalmut (study fund).
- Does the EOR have an American bank account? American companies understandably find it much easier to pay into US bank accounts and will be more likely to continue this arrangement for the long-term if the process is smooth for them.
- How much does it cost? EOR services charge fees for processing payment, so it’s important to find out what the associated costs are. These fees should be compared against other EORs and against the option of opening a freelance file.
- How do they handle foreign exchange rates? Since your salary will be converted from a foreign currency to Israeli Shekels, what rate are you getting on this exchange and what additional fees are being incurred?
- Do they have a proven record of success? An EOR that is extremely new and has very few clients may not have figured out all the kinks yet. It’s better to work with a company that has been doing this for some time and is popular with olim.
- Can you trust them with your money and to make the appropriate withholdings and deposits on your behalf? Seek referrals from friends and colleagues who are using the service you are considering.
More information about how EORs work can be found in our free e-book, Your Route to Career Success in Israel. To find out about Route 38’s Employer of Record services, contact us at info@route38.co.il.